In our current start-up environment, it’s common to find entrepreneurs focus their attention solely on fundraising. The reasons are obvious since the amount of capital a business obtains dictates how fast the business can scale. Plus there’s no crystal ball that predicts how long it takes to raise funds. No matter how important fundraising is, the decision to obtain funds is not that simple.
Some successful entrepreneurs find ways to raise the necessary funds without resorting to the usual way of raising venture capital. One method to do so is allowing your business to fund your company’s growth. By using the recurring revenues generated by your business, you can reach significant grown in the course of one year alone. You, too, can create a scalable platform minus outside capital help.
Tip #1 Sell a Product Early
When introducing a product to the market, many business owners place too much focus on perfection. Have you ever heard of the phrase “paralysis analysis”? This is what happens when entrepreneurs put too much priority on perfection—they don’t get the proverbial ball rolling.
When you expedite the availability of your product to the market, you can begin to create revenue much earlier. Bear in mind that the early product version doesn’t have to represent the whole picture of your long-term business vision.
Plenty of entrepreneurs who follow this approach end up improving their product as they move along. Your product will eventually go through an intensive evolution process and it will scale according to market needs.
Another advantage to this approach is you will be able to request feedback from your customers. As you launch the succeeding versions of your product, your customers will be impressed to see you kept their feedback in mind.
Tip #2 Capital-Efficiency is Key
During your early years, expect to keep an eagle eye on your cash flow since you will have to spend only where your precious funds are needed the most. Do prioritize the sales of your most valuable product instead of expensive research and development. You’ll also be expected to cut costs where non-essentials are concerned.
Even when you’ve reached a better financial standing, do maintain a similar efficient method. For example, during the first few years of sales, your sales people can sleep at friends’ houses or the cheapest hotel you can find when they travel to close a deal.
Tip #3 Always Negotiate
When it comes to funding, turning to VCs is not the only route at your disposal. Negotiate solid payment terms with your customers and you will be able to fund your business’ needs and achieve sustainability in the long run.
Aim for monthly pre-payment terms whenever possible. Take it a step up and negotiate for quarterly prepayment terms. And if you can close a deal with annual prepayments, you know you’re on the right track and your negotiating tactics are winning. You can also try offering discounts to customers in exchange for better prepayment terms.
We don’t mean to say VC funding is not an ideal method. What you need to keep in mind is that the traditional route of VC funding is not the only path you can take. When you discover creative ways to make your organization sustainable on its own, you open up a myriad of options that will allow your company to grow by leaps and bounds.